Figma's Stock Plunge: The Growth Deceleration That Spooked Wall Street

The tech darling Figma just took a nosedive, and I'm not surprised. After its celebrated IPO last month, Figma's stock crashed over 15% following its first earnings report. As someone who's watched many tech IPOs flame out spectacularly, this pattern feels all too familiar.

I've been tracking Figma since its July IPO, and while the 41% revenue growth sounds impressive on paper, Wall Street clearly expected more from this design software company. The growth slowdown is hitting harder than a margin call on a leveraged position.

The Growth Slowdown That Scared Everyone Away

Figma's Q2 revenue hit $250 million with actual profits of $28 million - rare in the software world where burning cash seems like the national sport. But looking at the trajectory, their growth is dropping like a stone: 48% in 2024, 46% in Q1 2025, 41% in Q2, and projections of just 33% for Q3 and a measly 30% for Q4.

This isn't just a minor slowdown - it's a cliff. And investors hate cliffs.

The elephant in the room is generative AI. Why pay premium fees for Figma when AI tools might soon do similar work for pennies? Netflix and Duolingo might be clients now, but for how long? The market seems to be betting that Figma's competitive moat isn't as wide as initially thought.

The IPO Trap That Retail Investors Fall Into

The stock's now down over 50% from last month's high, yet still trades at an astronomical 30x sales! Even with 2025 projections, we're looking at 27x sales. That's not just expensive - it's delusional in a market where good software companies trade at 10-20x.

Here's the kicker most retail investors missed: Figma only floated about 8% of its shares (37 million of 487 million total). This artificially created scarcity drove up prices in a market starved for exciting tech IPOs. Classic Wall Street move - create FOMO, then dump when retail investors pile in.

Even after this bloodbath, the stock is still up 60% from its $33 IPO price. The smart money got in early and probably already took profits.

The Hard Truth About Tech Stocks

Management talks about creating shareholder value through "big swings" - acquisitions, crypto investments, or other vague promises. I'd rather invest in a concrete business model with proven scalability than gamble on some undefined future "swing."

The valuation never made sense to begin with. This is the predictable result of investor exuberance meeting business reality.

While it's too early to completely write off Figma, this dramatic growth deceleration should make everyone question whether it deserves anything close to its current premium. The market clearly doesn't think so, and I'm inclined to agree.

For now, I'm watching from the sidelines. Some lessons in investing are expensive, and buying hyped IPOs at their peak is one of the costliest.